Are we going to witness an historical housing price correction amid sharpest rise in unemployment and social tension?...and the minimum you should know in order to protect yourself from this downturn from an economic, stock market and political point of view... with a pinch of humor and sarcasm.

Sunday, 21 October 2007

Finnish Banks Have Too Lax Mortgage Practices

"Finland's Financial Supervision (Rata) said in a statement on Monday 05 December 2005 that it was worried about the country's banks granting mortgages to customers unable to produce a down payment and lacking financial backing."

That was back in 2005. There were plenty of warning signs that have been completely ignored during the last 2 years. The financial system completely ignored the recommendation and went into granting loan to almost anybody (no savings, high level of debt relative to income, to young that just have their first job and no savings) and quite often over the value of the house itself (adding to the loan : Car, motor bike, boat, holiday etc...).

But then as recent as in September 2007, the FSA -Finland's Financial Supervision Authority is denying any wrong doing of the bank system:

"The FSA added a mortgage crisis similar to the current one in the US could not happen in Finland because unlike in the US, Finnish lenders were required to base their mortgage decisions chiefly on the borrower's solvency, not the size of security."

I will highlight "borrower's solvency" , what was the criteria? was it based on the solvency at a time of a low interest rate environment or based on business trick such as the one highlighted in the article "our-Finnish-sub-prime"